Shares of major Taiwanese DRAM chipmakers Nanya Technology Corp (南亞科技) and Inotera Memories Inc (華亞科技) rallied almost limit up yesterday after a fire damaged a Chinese plant of the world’s No. 2 memory chipmaker, SK Hynix Inc, sparking concern over a supply constraint.
The spot price of benchmark DDR3 DRAM chips spiked 17.84 percent to US$1.698 per unit by mid-day yesterday, according to Taipei-based market researcher TrendForce Corp (集邦科技).
Amid expectations that supply could tighten and push up global DRAM chip prices, shares of Nanya and Inotera soared 6.93 percent and 6.67 percent to NT$3.86 and NT$14.40 respectively.
PC DRAM chips are the biggest revenue sources for the two Taoyuan-based companies.
On Wednesday afternoon, a fire broke out at the Hynix plant in Wuxi, Jiangsu Province. Even though the blaze was put out within two hours, operations were suspended. The South Korean firm said it expects to resume operations soon.
There was one minor injury from the blaze, but no major damage to production equipment, Hynix said in an e-mailed statement.
The company said it was still investigating the cause of the fire.
“Currently, there is no material damage to the fab equipment in the clean room, thus we expect to resume operations in a short time period so that overall production and supply volume would not be materially affected,” Hynix said.
The Wuxi plant has a monthly capacity of 140,000 units , accounting for half of its total DRAM capacity, according to JPMorgan Securities (Far East) Ltd’s estimate.
Since the majority of the plant’s output is PC DRAM chips and some server DRAM chips, JPMorgan’s Seoul-based analyst J.J. Park said in a report that “the issue could be serious,” given that all operations have been suspended and the smoke could have leaked into a cleaning room.
“The impact to PC DRAM should be relatively high,” Park wrote.
Hynix holds about 26 percent of the global DRAM market, he said.
Although it was uncertain how much capacity was impacted and how long it would take to recover, there was a chance for PC DRAM spot prices to increase in the near term, Park said.
However, contract prices for PC DRAM chips are unlikely to move up, Park said, citing weak PC demand.
According to DRAMeXchange, Hynix accounted for about 30 percent of the global DRAM market in terms of sales in the second quarter, after Samsung Electronics Co, which had 32.7 percent.
Grand Fortune Securities (福邦證券) analyst Chen Wei-tai said Hynix might only need one to two months to resume operations at the Wuxi plant.
Chen said investors have high hopes that rising product prices will further strengthen Nanya and Inotera’s bottom lines.
“I expect Nanya and Inotera will remain profitable in the third quarter and even in the fourth quarter on strong pricing power, extending the momentum seen in the first half of the year,” Chen said.
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